Tesla Motors Shaken Up, Laying Off 491
tjstork writes "Tesla Motors, the darling of technorati for its high performance electric car, may be about to go belly up. Venture capital is cut off, layoffs are under way, and construction plans are being stretched out. Elon Musk has ousted the CEO and taken the reins, blaming the global credit crunch."
Misleading summary (Score:5, Informative)
Re:Credit crunch my butt (Score:4, Informative)
their product takes time to work out the lumps because their pioneering. The lure of the product was that Tesla was doing this because other companies wouldn't and someday that'd be big.
In the last few weeks the feds kicked in $25 Billion (with a B) to the plain-ole auto companies to compete with them. That's more funding than Tesla will ever get even if they made a profit ... VCs are jumping ship.
Re:Unappealing except for early adopters (Score:4, Informative)
Yes...the demand is so very limited that they have preorders for every single car that's scheduled to roll off the assembly line till 2009.
Demand is not the issue at all.
The issue is that they cannot get loans. This means that their only way to survive is to become profitable now as opposed to take out loans that they'd fully be able to repay later.
Re:Irony (Score:5, Informative)
Ford and GM going belly up wouldn't magically cause them and their billions of assets, be it physical or intellectual to disappear.
What you'd have is companies breaking away from the main brand and being sold off. Ford would let Mazda go, GM Saab and so on.
What would die would be the GM/Ford brand names along with the pension plans and other UAW union benefits. Which frankly is a good thing for the US auto industry in the long run.
Re:Credit crunch my butt (Score:3, Informative)
Actually, the military industry sustained growth. In fact, even when the US was an autarchy between WW1 and WW2 the economy grew.
Two things to remember: a) the rest of the world was in the great depression too, b) engaging in a huge war got us out by spurring heavy industry to create jobs and produce war machines, bombs, and bullets.
here ya go (Score:5, Informative)
Detroit big three and bailouts [google.com]
Re:Credit crunch my butt (Score:5, Informative)
Your idea is correct but PLEASE pick a better example to illustrate it with. Betamax was more expensive and had much shorter recording time per tape. For most consumers, these disadvantages very rationally trumped its higher video resolution.
Re:Credit crunch my butt (Score:5, Informative)
"The war saved the economy" is one of those fascinating "facts" that gets repeated constantly but which simply doesn't hold up if you look at it closely.
Consider a similar situation: the government places orders for all sorts of war supplies. Tanks, planes, food, ammo, etc. They all get loaded up on trucks and trains and taken to sea ports. At the ports they are loaded onto cargo ships. Once full, the ships leave port, sail out to sea, and shove everything into the ocean.
And just for good measure, a large fraction of the ships themselves are also sunk.
The remaining ships come back for more, and the shipyards build replacements for the sunken ships.
Economically, this situation is identical to what you experience during a major overseas war such as WWII. But somehow, shoving thousands of tanks and planes into the ocean, and tons of food and ammunition right behind it, doesn't seem like a net gain. In fact, it seems an awful lot like a net loss.
Maybe extra government spending on the war stimulated the economy. But nothing about that stimulus required a war, and indeed without the war it could have been done much better and less wastefully.
Re:Irony (Score:3, Informative)
Interestingly, I see Ford better surviving in this new, leaner climate for auto sales.
The reason is simple: Ford already has a product line (the European Ford division) that can within a few years be the backbone of most of their sales in the USA. We're stating to see the fruits of that change now: the 4th-generation Ford Fiesta will arrive in the USA around January 2010, the third-generation Ford Focus will arrive in the USA probably summer 2010, and Ford has begun work to essentially merge the European Mondeo and US-market Fusion into a single model.
Re:Electric Cars (Score:4, Informative)
Re:Irony (Score:3, Informative)
People keep saying how innovative Tesla is/was?
But the Tesla roadster was nothing but an electric race car.. It is very expensive and not all that practical. They have not even shipped any to customers yet. We have no idea if they can even make a profit at $110,000 each.
Toyota, Ford, Honda, and GM are shipping hybrids now. The Volt from GM and the new all electric from Chrysler are both pretty innovative and best of all probably producible.
The Tesla Roadster is at best an expensive exotic toy. At wost an unproductive fantasy.
Tesla will not usher in the era of alternative vehicles. It will be Toyta, GM, Ford, Honda and all the other big car companies.
Re:Get an electric Elise.. (Score:3, Informative)
eh, did you bother to read that article? the Tesla Roadster is the Electric Elise. Tesla Motors licensed the Elise chassis from Lotus to build their roadster on. that choice was made probably based, not just on the aesthetics of the design, but also because Lotus has a tradition of making light-weight cars with extremely high performance and great handling characteristics. so this was a rational choice for the starting point of the Tesla Roadster.
Re:Fired the CEO - not really.... (Score:4, Informative)
... said company founder Elon Musk, who also announced that he will assume the role of chief executive officer. He replaces Ze'ev Drori, who becomes vice chairman and continues as a board member.
Looks like the old CEO is still there...
Re:Great idea (Score:3, Informative)
But you have to put up with higher unemployment rates [bls.gov].
-l
why VC cash may be fleeting (Score:5, Informative)
First, the people we call "VC's" are really the "General Partners" (GP's). They're the people the companies meet with and the ones who ultimately decide how much to invest in which companies. They'll have a variety of "Associates" or "Venture Partners" around helping out, but the "General Partners" are the ones who decide where the money goes.
The money itself doesn't come from loans, per say, nor is the money sitting around in some kind of mixed asset class. VC's don't have money laying around in a bank somewhere, at least not a lot of it. The money comes from "Limited Partners" (LP's). The LP's could be very high net worth individuals, they could be pension funds, they could be insurance groups, they could even be "funds of funds" (funds created just to figure out which VC's to put money into). A typical VC will have a mix of all of the above in their LP pool.
So, if a VC has a "$250 million dollar fund" that doesn't mean that everyone wired over a total of $250MM when the fund was created and that the VC's draw he money down. What it means is that the VC's have $250MM to call on when they make an investment. So, VC-Guys decide "hey let's put $10MM in this startup", they make a "capital call". That's when they tell their LP's to put in their pro-rata share of the $10MM they decided to invest. The LP's move the money into a single account, that account makes the investment on behalf of the Venture Capital group. When they've spent the whole $250MM (or whatever) they have hopefully already raised another fund to start investing from.
It's that last part that should be scary to any of us dependent upon the Venture Capital market doing its thing. Guess what all those pension fund and insurance groups are doing right now? I'll tell you what they're NOT doing, they're NOT showering VC's with new commitments for new funds. Even worse, some of them are so upside down that some LP's can't make their capital calls. This mean that the VC calls and says "your pro-rata share of the $10MM is $$684k" and the LP says "...er, I don't got it. Sorry". So the VC's suddenly have less money to invest than they thought.
This results in a lot of VC's sitting on their hands and not investing in big rounds of later stage companies like Tesla (or maybe the company you're at now). This isn't a bad idea for them either, the latter stage financing that they counted on their companies getting (debt based instead of equity based) is largely gone too. So they build a company up to the stage they used to build it up to and there's no one there to take it to the next level. The right thing to do is to get a company to cash-flow positive ASAP, and then worry about growth later when there is outside money available to help you do that. TFA says "the company's goal is to become cash-flow positive in six to nine months", presumably (hopefully?) they have access to enough cash to pull that off.
wow, I was with you right up till.... (Score:3, Informative)
If you want to know which policy is more valuable, take a look at the Euro and the Pound versus the Dollar. This anti-Socialism nonsense is based in a fantasy world where facts are non-existent, and anecdotes trump reality.
You sir, haven't the slightest clue what you are talking about. Currency exchange rates are set by a whole variety of different criteria. It has nothing to do with socialism, success, or any other such personal trait you ascribe to nations. Talk about anecdotes! The relative value of a nation's currency has NO relation with which policy is more "valuable". (whatever that means)
Why don't you try comparing GNP's, GDP's, M1, M2, and M3 money rates, interest rates, trade balances, etc? I'll give you a hint....those are the things that matter when we are talking about exchange rates.
All you forgot about is East Germany (Score:5, Informative)
Comparing the whole of Germany isn't quite the same. West Germany has comparable, and even lower unemployment rates than the United States, but the leftovers of East German policies are still affecting the economy as a whole. Government subsidies are still flowing East, just as the Northeast and West coast pay for the infrastructure of the rest of our country.
Even with a former communist bloc attached to it, Germany has lower poverty levels, better education, and equal access to health care. Oh, and when polled, the Germans are far more satisfied with their health care than Americans are with their own, despite paying less than half of what we pay.
Re:Credit crunch my butt (Score:1, Informative)
Fighting between some actually started around 1931 or before depending on how things are looked at. "Official starting time" is accepted as being Germany's invasion of Poland in 1939. The US didn't "officiallly" enter the war till December 7, 1941. Until around then the US was selling to both sides of many conflicts collecting in gold for much of what it was selling that was directly military related. The majority of these sales were to the "Allies" and the US were polictically tied to them, however private businesses and corporations sold much to the other side. As the allied side got low on gold, in 1941, the US entered into the "Lend Lease" agreement and embargoed raw material and scrap metal trade with Japan. IBM and others were still doing some business with Germany.
Essentially the US did profit from WWII well before it entered the war on the side of the "Allies". The US was still collecting payments related to the "Lend Lease" related items from the UK till the end of 2006.
It's Called the "Broken Window Fallacy" (Score:4, Informative)
Parable of the Broken Window [wikipedia.org]
The parable describes a shopkeeper whose window is broken by a little boy. Everyone sympathizes with the man whose window was broken, but pretty soon they start to suggest that the broken window makes work for the glazier, who will then buy bread, benefiting the baker, who will then buy shoes, benefiting the cobbler, etc. Finally, the onlookers conclude that the little boy was not guilty of vandalism; instead he was a public benefactor, creating economic benefits for everyone in town.
Bastiat's original parable of the broken window went like this:
The fallacy of the onlookers' argument is that they considered only the benefits of purchasing a new window, but they ignored the cost to the shopkeeper. As the shopkeeper was forced to spend his money on a new window, he could not spend it on something else. For example, the shopkeeper might have preferred to spend the money on bread and shoes for himself, but now cannot so enrich the baker and cobbler because he must fix his window.
Thus, the child did not bring any net benefit to the town. Instead, he made the town poorer by at least the value of one window, if not more. His actions benefited the glazier, but at the expense not only of the shopkeeper, but the baker and cobbler as well.
Re:Unappealing except for early adopters (Score:3, Informative)
Which is exactly why they won't sell many. If they want to be like Bugatti and go bankrupt every other year, fine, build sports cars. If they want to become profitable, sell something people will actually buy.
The idea that they've put forward is to fund development with early-adopter bleeding-edge taxes. That is, the roadster isn't the goal. Its a first-run teaser. It helps pay for ongoing development of the technology by putting something exciting and attractive to early-adopters. It was also an attempt to stand out. Yet Another Econo-box would have been... well... yet another econo-box. The roadster also challenges the concept of what an electric vehicle is; that is to say, yet another econo-box.
I know this is /. and TFA is off-limits, but... (Score:2, Informative)
Re:Get an electric Elise.. (Score:3, Informative)
true. as i understand it, the Elise doesn't have power windows/locks or any of the amenities that the Tesla Roadster has, such as stereo sound system, mp3 playback, PMP interface, air conditioning, etc. it really is a bare bone vehicle, trading passenger comfort for supreme performance.
that's why the Elise has a curb weight of about 1900~2000 lbs (depending on which model you get). the Tesla Roadster weighs significantly more at around 2700 lbs. but the Elise's engine output is only 134 bhp versus the Tesla Roadster's 248.
so aside from the chassis they're two completely different machines. i'm sure the Elise handles much better, but the Tesla Roadster is more of a luxury sports car.
Re:Credit crunch my butt (Score:4, Informative)
VCs do not operate on loans. They do not hoard their own cash because they make more money on the interest than they do in their own investments.
The money a VC invests is contributed by their investors. Some are seriously rich people, some are institutions (think .edu endowment funds with $100s of millions or $billions). None of it is a loan. If the VC loses all the money, the investors are out the money, period, though they often have a claim on the VC's carry fee (typically 20% of the investment) in that case.
Commercial paper is also not an interbank loan. It's a short term unsecured loan to finance operating expenses. Non-banks absolutely participate in this market.
Re:What the programmer had to say about the car... (Score:3, Informative)
I would guess that it means "if you spent the same amount in gas on a typical gasoline car", because people relate to mpg as a familiar yardstick of efficiency. You could use something something accurate like "miles per dollar", but you run in the problem that most people don't know their mpd for their car and thus can't immediately see the gain in efficientcy. Mention it in mpg terms, and you can immediately see that's it's 7x more efficient than a 20mpg car.
Let's say you spend $3 to charge your electric. On that $3, you can drive 140 miles, which is 46.6 mpd (miles per dollar).
Now compare that to buying $3 for one gallon of gasoline, which might you to drive 20 miles (at 20mpg). That's 6.6 mpd (again miles per dollar".
The gain in efficiency (140/20 vs 46.6/6.6) is still the same no matter how you express it -- 7 times.
Re:Credit crunch my butt (Score:3, Informative)
I agree with your general point, but: exactly how dependable and well-capitalized do you think GM really is? Here's their financials [yahoo.com]. Summary (Note that some are in negative multiples of their market cap):
Book value: negative 15 times market cap.
Earnings (profits): negative 16 times market cap
Profit margin: -34%
Current cash: $20 billion
Amount lost in first two quarters of '08: $18 billion
Even if Tesla merely had their waiting list to work with, they'd still last longer than GM ... if you ignore GM's lobbying advantage ... which was my point.
You have no connection to reality. (Score:3, Informative)
Speaking as somebody who *has* tried to line up funding and as a former workflow and operations consultant to startups, you're talking out your ass, especially in the current market. I've seen dozens of companies awash with money who had no working product nor credible plan to make one, an executive team who couldn't even spell the names of any of the engineering societies, and very expensive offices filled with a mix of suckers who had thought they were getting into something credible, short-term players like me making a quick buck and getting back out, and dozens of pretty, smiley ex-frat boys and sorority sisters who were happily burning through OPM, Other People's Money, as fast as the development people could get it, which was sometimes pretty damn fast.
I've also watched one cash-starved company after another struggle year in and year out despite excellent products, honest, talented executive teams, and customers who were eager to buy more if the capital could just be found to let the production ramp up.
Less than a month ago I watched a promising bike company self-destruct. I'm currently watching the place where I rent my space, an 26,000 square foot tech center run by a hard working, insightful team with plenty of tenants who want to stay, go down in flames due largely to lack of cash. I watched a multinational run by brilliant people doing amazing work AND that was meeting its earning targets and other milestones get left to fall into Chapter 7 bankruptcy because the VCs who had promised third round funding backed out when, to be honest, the fads shifted and they lost interest in the company's kind of business.
I don't know what libertarian/corporatist fantasy you're living in but out here among those of us who live and breathe real entrepreneurship, your Horatio Alger chuckleheadedness isn't just contemptible, it hurts to even read.
Re:We need tech startups to live (Score:3, Informative)
Oh, and # of lead-acid batteries in cars:1
# of li-ion cells in a laptop: 6
# of li-ion cells in a Tesla: 6,831